Same firm for bookkeeping and the tax return, or keep them separate on purpose

Question

Say a preparer offers to take over bookkeeping for $450 a month, and drops the return fee from $2,400 to $1,900 on the reasoning that January will not be spent fixing someone else's work. Net that runs about $4,900 a year more than a standalone bookkeeper at $210 a month. The case for handing both to one firm is that the person who has to defend the numbers is the person who recorded them. Depreciation schedules, how a repair got coded, which entity absorbed which cost, all decided once instead of twice. No January handoff, no unexplained list of adjusting entries, no discovering in March that twelve months of coding used a category the software does not map to. The case for keeping them separate is price and a second set of eyes. A bookkeeper's hour costs less than a CPA's hour, and most of the job needs bookkeeping hours, not tax expertise. There is also real value in the person preparing the return not being the only person who has looked at the underlying records. A misclassification is often caught precisely by someone who did not make it. A middle path some owners use is one firm for both, but insisting on independent access to the underlying file so a clean exit is possible later. That sounds sensible in principle, though whether it survives an actual engagement letter depends on how that access is defined in writing. For an owner with several doors across more than one entity, including a partnership, the added coordination cost of two firms usually looks smaller once the complexity is real, which tends to tip the scale toward one integrated firm.

monica_tran3 · Answer

Keeping the bookkeeper and the preparer separate is usually about rate. A bookkeeper billing around $55 an hour and a CPA's staff billing $145 for functionally identical work adds up fast on volume, often several thousand dollars a year. The January handoff worry is manageable if the bookkeeper is made to produce exactly what the preparer asks for, in the format requested. Getting both of them on one call ahead of tax season, once, tends to make every year after that boring, which is the goal. A meaningful reduction in the return fee for taking over the books usually signals real expected savings from clean records, which means real hours currently being spent on cleanup. Worth asking a preparer offering that trade what specifically they're fixing.

Rena Guide · Answer

Worth separating the roles, because the words get used loosely.

A bookkeeper records transactions, reconciles bank and credit card accounts to statements, and produces financial statements. That is recordkeeping work and in most states it carries no license requirement.

A CPA or an enrolled agent is licensed and can prepare and sign returns and represent you before the tax authority. Enrolled agents are federally licensed, CPAs are licensed by state boards, and what each can do varies. A tax preparer's job starts from books that already exist. If those books are wrong, the preparer either fixes them, which is billed time, or files from numbers that don't hold up.

"Adjusting entries" are the corrections a preparer makes at year end to get the books onto the basis the return requires. Depreciation is usually one of them, since most bookkeeping software won't compute it for you correctly on its own. If those entries never get pushed back into your accounting file, your books and your return drift apart, which is a common source of confusion in year two.

On the question you actually asked, both arrangements are normal and the cost difference is the main thing you can measure. What you can't measure from outside is quality. Ask any prospective provider who does the depreciation schedule, who owns the accounting file if you leave, and whether adjusting entries get returned to your books. Get those answers in writing in the engagement letter. Which structure fits your entities and returns is a question for the licensed professional you hire.

nataliehsu · Answer

The access question in @rena-guide's last paragraph is the one I'd nail down first. I've watched a friend try to leave a combined firm and discover the accounting subscription was under the firm's account, not his. He got a set of PDFs and started over.

luis_carrera · Answer

The $4,900 delta assumes the standalone bookkeeper at $210 is doing the same scope. Is she running depreciation and fixed asset schedules? Is she handling intercompany between the two entities? At $210 a month for six doors and two entities, categorization and reconciliation is the likely ceiling, which means the CPA's $450 includes work already being paid for inside the $2,400 return fee. Redo the comparison with the return fee in it and the gap gets smaller than it looks.

derekj19 · Answer

@luis_carrera is right about scope but the second pair of eyes point is still real to me. If one firm codes it and the same firm signs it, nobody in the chain has an incentive to question the coding.

mikeoconnell7 · Answer

The arrangement @monica_tran3 describes is the one that tends to hold up, where the bookkeeper works to the preparer's specification. The client keeps the cheaper hours and the preparer stops eating cleanup. The thing that makes it fail is when neither one will own the depreciation schedule. The bookkeeper says the CPA handles it, the CPA assumes it is already in the books, and two years later nobody can tell you accumulated depreciation per property without rebuilding it. Put that in writing with a name attached before anything gets signed.

ryanmck27 · Answer

Naive question. If the CPA is doing the books all year, does he actually look at them monthly, or does he do twelve months of coding in one sitting in January and just call it bookkeeping? Because at $450 a month I'd want to know which one I'm buying.

renee_dubois · Answer

@ryanmck27 that is the right question, and the answer is often the second one. A firm can charge $400 a month for what turns out to be a quarterly sweep with a monthly invoice. The tell shows up when someone asks for a September P&L on October 6th and is told it will be ready after the quarter is processed. On a small multifamily portfolio of around eleven units, running two providers earns its cost when the bookkeeper closes by the 10th and the statements get read that same week. That is how a water bill tripling after a slab leak gets caught in the month it happens. Nobody at a tax firm is going to call about that in April.

nicole_adeyemi · Answer

A land heavy position sits differently, because land generates almost no transactions, so an owner there can reasonably keep the books themselves and buy the return only. Twenty minutes a month. The moment a partner sits inside an entity that stops being sensible, and @ehernandez74 has one, which is the detail I would weigh heaviest here. Partner reporting has a way of turning a casual arrangement into a dispute.

gregpowell66 · Answer

The analogy that helps here comes from construction. You do not hire the same crew to do the work and the inspection. Honesty is not the concern. A person stops seeing things after the fortieth pass through the same file. Still, on six doors the amount of judgment in the books is small. Rents in, mortgage and taxes and insurance out, the occasional repair or capital item where the coding matters. The judgment calls are the capital items, and those get decided by the preparer either way.

Same firm for bookkeeping and the tax return, or keep them separate on purpose

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